You are buying a Tesla for $70,000 today with a 5-year loan of 5 annual payments...

You are buying a Tesla for $70,000 today with a 5-year loan of 5 annual payments (the first payment being a year from today) with an interest rate 3%. Then, at 5th year, you will sell the car. A five-year old Tesla is currently selling for $50,000. Your power consumption is about 3 kWh/day. Currently, you pay 15 cents per kWh. You expect the car to need maintenance costs once, 3 years from today. The current cost for this maintenance is $600. Inflation rate is 2%. What is the NPV of using this car for 5 years? (Please note that all costs go up by inflation rate)

Please draw the cash flow diagram to make it more understandable

Solutions

Expert Solution

Cash Flows are as follows:-

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5
Purchase cost	0
Sales Value						50000
Maintenance Cost				-636.725
Annual Payments		-15284.82	-15284.8	-15284.8	-15284.8	-15284.8
Power Consumption		-164.25	-167.535	-170.886	-174.303	-177.789

Total Cash Flows	0	-15449.07	-15452.4	-16092.4	-15459.1	34537.39

npv	-25472.20

jeff jeffy answered 1 year ago

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